LOTUS LANDMARKS (INDIA) PVT. LTD vs RVP CITY OWNERS
- Court
- Karnataka High Court
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MFA No. 103181 of 2022
CNR: KAHC020126132022
IN THE HIGH COURT OF KARNATAKA AT DHARWAD
®
ST
DATED THIS THE 31 DAY OF AUGUST, 2026
PRESENT
THE HON'BLE MR. JUSTICE S.SUNIL DUTT YADAV
AND
THE HON'BLE MRS JUSTICE K.G.SHANTHI
MISCELLANEOUS FIRST APPEAL NO.103181 OF 2022 (AA)w
BETWEEN:
LOTUS LANDMARKS (INDIA) PVT. LTD.,
REPRESENTED BY ITS DIRECTOR,
SHRI. DILIP S/O PREMARAJ CHANDAK,
AGE. 58 YEARS, OCC. BUSINESS,
R/O. CORPORATE OFFICE AT NO.1,
RICHMOND PARK, OPP: ORCHID SCHOOL,
BANER ROAD, BANER, PUNE-411002.
…APPELLANT
(BY SRI. S.S. NAGANAND, SENIOR COUNSEL FOR
SRI. S.B. HEBBALLI, ADVOCATE)
AND:
1. RVP CITY OWNERS,
REPRESENTED BY SHRI. SHRINIVAS R. PAVUSKAR,
TH
‘BHAGYODAY’ PLOT NO.6, 7 AND 8, 4 CROSS,
ADARSH NAGAR, M-VADAGAON, BELAGAVI-587101.
2. SHRI. SHRINIVAS S/O RAMAKRISHNA PAVUSKAR,
AGE. 67 YEARS, OCC. BUSINESS,
TH
R/O. BHAGYODAYA BUILDING, 4 CROSS,
ADARSH NAGAR, M-VADAGAON, BELAGAVI-587101.
3. SHRI. EKNATH S/O RAMAKRISHNA PAVUSKAR,
AGE. 54 YEARS, OCC. BUSINESS AND AGRICULTURE,
ST
R/O. BHAGYODAYA BUILDING, 1 CROSS,
SARVODAYA MARG, HINDWADI, BELAGAVI-587101.
4. SMT. VAISHNAVI W/O PRADEEP PAVUSKAR,
AGE. 45 YEARS, OCC. HOUSEHOLD WORK,
R/O. 175/1, BHAGYODAYA BUILDING,
MARATHA MANGAL KARYALAY,
INDRAPRASTH NAGAR, BELAGAVI-587101.
Digitally
signed by
VINAYAKA B
V
Location:
High Court
of Karnataka,
Dharwad
Bench
Date:
2026.09.01
11:54:42
+0530
VINAYAKA
B V
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5. SHRI. SURYANAND S/O PARADEEP PAVUSKAR,
AGE. 32 YEARS, OCC. BUSINESS,
R/O. 175/1, BHAGYODAYA BUILDING,
MARATHA MANGAL KARYALAY,
INDRAPRASTH NAGAR, BELAGAVI-587101.
6. SHRI. SANDEEP S/O PRADEEP PAVUSKAR,
AGE. 28 YEARS, OCC. BUSINESS,
R/O. 175/1, BHAGYODAYA BUILDING,
MARATHA MANGAL KARYALAY,
INDRAPRASTH NAGAR, BELAGAVI-587101.
7. MISS. AISHWARYA D/O PRADEEP PAVUSKAR,
AGE. 19 YEARS, OCC. STUDENT,
R/O. 175/1, BHAGYODAYA BUILDING,
MARATHA MANGAL KARYALAY,
INDRAPRASTH NAGAR, BELAGAVI-587101.
8. ARBITRATOR, SHRI. MALLIKARJUN S. MUDNUR,
AGE. 55 YEARS, OCC. VALUER,
ST
R/O. 1 FLOOR, BASAVARAJ COMPLEX,
CTS NO.4855/47B, APMC ROAD,
SADASHIV NAGAR, BELAGAVI-587101.
…RESPONDENTS
(BY SRI. ANANT MANDAGI, SENIOR COUNSEL FOR
SRI. MRUTYUNJAYA TATA BANGI, ADVOCATE FOR C/R1 TO C/R7;
NOTICE TO R8 IS SERVED)
THIS MFA IS FILED UNDER SECTION 37(1) (b) OF
ARBITRATION AND CONCILIATION ACT 1996, PRAYING TO SET
ASIDE THE IMPUGNED ORDER DATED 22.04.2022, PASSED IN
ARBITRATION PETITION NO.2/2021 ON THE FILE OF PRL. DISTRICT
JUDGE BELAGAVI AND SET ASIDE THE ARBITRAL AWARD DATED
28.01.2019 PASSED BY THE RESPONDENT NO.8/SOLE ARBITRATOR,
IMPUGNED BEFORE THE LEARNED DISTRICT JUDGE AND REJECT THE
CLAIM PETITION FILED BY THE RESPONDENTS AND ETC.
THIS APPEAL HAVING BEEN HEARD AND RESERVED ON
16.07.2026 COMING ON FOR PRONOUNCEMENT OF JUDGMENT,
THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE S.SUNIL DUTT YADAV
AND
HON'BLE MRS JUSTICE K.G.SHANTHI
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MFA No. 103181 of 2022
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CAV JUDGMENT
(PER: HON'BLE MR. JUSTICE S.SUNIL DUTT YADAV)
The present appeal is by M/s. Lotus Landmarks
(India) Pvt. Ltd., calling in question the order dated
22.04.2022 passed in Arbitration Petition No.2/2021 by
the Prl. District Judge, Belagavi filed under Section 34 of
the Arbitration and Conciliation Act, 1996 [‘Arbitration
Act’]. A.P.No.2/2021 was filed seeking to set aside the
arbitral award dated 28.01.2019 passed by the Arbitrator.
2. The parties are referred to as per the rank in
the Arbitration Petition for the purpose of convenience.
3. The petitioner M/s. Lotus Landmarks (India)
Pvt. Ltd., was a land developer and had entered into a
Joint Venture Agreement on 17.04.2016 with the land
owners, i.e., respondent no.2 Sri Shrinivas s/o
Ramakrishna Pavuskar and the deceased Pradeep
Ramkrishna Pavuskar for the development of the layout
“RVP City”, which land was situated near the Kanbargi
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Road, Belagavi in land bearing R.S. Nos.1282/5, 1282/1B,
1282/4, 1282/6, 1282/3B/1 + 3B/2, 1282/1K and
1282/3A/1 + 3A/2, situated at Kanbargi Road, Belgaum.
4. In terms of the Joint Venture Agreement, there
was sharing of the developed residential plots and the
Project was to be completed within a period of 24 months
from the date of Agreement with a grace period of six
months. There was a timeline with default clause.
5. After the death of Sri Pradeep Ramkrishna
Pavuskar, it is averred that the dispute arose between the
parties and respondent no.2 – Shrinivas Ramkrishna
Pavuskar addressed a letter dated 17.11.2017 to stop the
development work and called upon the petitioner to pay
damages of Rs.1,01,83,435/-. The respondent, based on
the Inspection Report, conducted by the K.L.S. Gogte
Institute of Technology [‘KLS-GIT’] Udyambag, Belagavi,
referred the dispute to its nominee Arbitrator. The Arbitral
proceedings were conducted by the nominee Arbitrator
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which according to the petitioner was contrary to the
procedure envisaged under Clause-25 of the Joint Venture
Agreement dated 17.04.2016 which provided for a
different procedure.
6. The nominee Arbitrator having passed an Award
which was challenged before the Prl. District Judge,
Belagavi in Arbitration Petition No.2/2021 filed under
Section 34 of the Arbitration Act. The Arbitrator had
ordered in terms of the final order as follows:-
“XI. FINAL AWARD:
I, the Sole Arbitrator in the matter of Arbitration for
dispute arising out of the work of layout development
at RVP City near Kanbargi Road, Belagavi between RVP
City Owners (Claimants) & Lotus Landmarks (India)
Pvt. Ltd. (Respondents) give my Award as under:
a) The Respondent is liable to pay the Claimants an
amount of Rs. 2,21,58,000/- (Rupees two crores
twenty one lakhs fifty eight thousand only). The
Claimants are entitled to an interest at 18% p.a. until
realization of the said amount.
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b) The Respondent is directed to pay the Claimants a
sum of Rs. 25,00,000/- (Rupees twenty five lakhs only)
towards compensation. The Claimants are entitled to an
interest at 18% p.a. until realization of the said
amount.
c) The JV Agreement & the General Power of Attorney
executed in favour of the Respondent stand terminated.
d) The Respondent shall clear all encumbrances (if any)
and also settle outstanding payments (if any) due to
labour, material suppliers, etc. involved in the
development work at site.
e) Advances collected by the Respondent (if any) by
agreement for sale of plots in Respondent's share shall
be settled at the risk & costs of the Respondent. It
applies to plot Nos. 122 & 123 also.
f) The Respondent shall comply all stipulations laid
down by RERA and also enable the Claimants to login
RERA website with a valid password.
g) All original documents like JV Agreements - 3 nos.,
POA - 2 nos., NA orders for RS No.1282 - 5 nos.,
Approved layout plans - 2 nos.; Receipts for BUDA
charges, Receipts for payments made to Govt.
Departments, CTS Extracts, KJP Plan & records, etc. to
be handed over by the Respondent to the Claimants.”
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7. The District Court dealing with the petition
under Section 34 framed the following point for
consideration:-
(i) Whether the petitioners have made out any of
the grounds enumerated under Section 34(2) or
34(2A) of the Arbitration and Conciliation Act, 1996
to set aside the impugned Award?
8. The said issue was held in the negative and the
petition was dismissed.
9. The contentions raised by the petitioner and its
consideration by the District Court under Section 34 is as
follows:-
CONTENTION RESPONSE OF THE PRL. DISTRICT JUDGE
Main Issue: Whether the
petitioners have made out
any of the grounds
enumerated under Section
34(2) or 34(2A) of the
Arbitration and
Conciliation Act, 1996, to
set aside the impugned
award?
Answered in the Negative – [Para-6 and 7]
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Specific Contentions and their corresponding response of the Court
with its Reasoning
Contention 1- Respondent
No. 1 is not a party to the
Agreement, and therefore
the dispute could not have
been referred to an
arbitrator.
There cannot be any doubt that the dispute was
referred to arbitration, and it was on behalf of the
owners who were parties to the agreement, and
the petitioner very well knew about the identity of
the respondent. It is not the case of the petitioner
that there were some other agreements between
the said parties or with RVP City Owners.
Therefore, this objection raised under challenge
under Section 34 of the Arbitration and
Conciliation Act cannot be entertained [para-16]
Contention 2- there
should have been two
arbitrators and an umpire,
and therefore the
appointment of the
arbitrator is defective
From a perusal of the agreement, if the arbitrators
are not appointed within the time limit outlined in
the clause, the arbitrator shall be appointed in
accordance with the Arbitration and Conciliation
Act (Section 10 of the same). Therefore, since the
petitioner failed to appoint his arbitrator within 30
days under Clause 50, the mechanism under
Section 10(2) permitted the appointment of a sole
arbitrator. Also, in the absence of any material to
show that the petitioner herein had objected to
the commencement of the arbitral proceedings by
the sole arbitrator, it cannot be said that the
arbitral proceedings are bad in law. Also, when
the petitioner had not suggested his arbitrator
within 30 days from the date of notice, he had
foregone that right and the provisions of the
Arbitration and Conciliation Act would prevail.
[Para-17]
Contention 3- The arbitral
award is not clear on the
point whether the
petitioner has waived his
right to appoint an
The Court held that the proceedings of the learned
arbitrator dated 05.03.2018 clearly show that the
petitioner Satish Giri had appeared before the
learned arbitrator and put forth his contention
before him. He had also participated in the
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arbitrator, and cannot be proceedings, and he had not at all raised the point
accepted. that he had the right to appoint a second
arbitrator and that the sole arbitrator does not
have the power to arbitrate the dispute. Thus the
right to appoint was waived. [para-18]
Contention 4- The
petitioner was
incapacitated to appear
before the learned
arbitrator
The Prl. District Judge dismissed this ground on
the ground that there was no evidence available
on record to show his incapacity, which is one of
the grounds available under section 34(2) of the
Arbitration and Conciliation Act to interfere with
the award. [para-19]
Contention 5- The
Respondent has not filed
any claim statement
before the learned
Arbitrator, and therefore
the arbitral proceedings
are vitiated.
The claim petition need not be in writing, and it
may be in the form of a statement made before
the learned arbitrator. The Prl. District Judge held
that the non-filing of a formal claim petition after
the parties appeared before the arbitrator does
not constitute a gross violation of arbitral
procedure. The arbitrator has documented both
the claim statement and the respondent’s
objection, and the petitioner could have submitted
an objection statement to address the disputes
now presented to the court, which the petitioner
did not challenge. [para-20]
Contention 6- The learned
Arbitrator has relied on
the report by the GIT,
which was not warranted
and which was not
permissible.
The KLS-GIT report was nothing but a document
which was relied upon by the respondents as a
piece of evidence in support of their claim.
Therefore, unless the document relied upon by the
respondents is rebutted by cogent evidence, it
could not have been discarded by him.
[paras -21 and 22]
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10. The present appeal is filed challenging the order
dated 22.04.2022 passed in A.P.No.2/2021 under Section
34 and various contentions are raised including the
following:-
(i) The usurpation of the powers by the nominee
Arbitrator was contrary to the terms agreed and the
procedure of appointment of Arbitrator which vitiates
the entire arbitration proceedings;
(ii) Where Joint Venture Agreement provided for
appointment of two Arbitrators, one by each of the
parties and both nominees were authorised to
appoint an umpire, the proceedings by the nominee
Arbitrator of only one of the parties is contrary to
applicable procedure and vitiates the proceedings.
(iii) That the further finding by the learned District
Judge that the petitioner not having suggested his
nominee as an Arbitrator within thirty days from the
date of notice, the respondent no.2 had foregone
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such right and in terms of Section 10 of Arbitration
Act and accordingly, the sole Arbitrator was
empowered to arbitrate the dispute, was an
erroneous finding.
(iv) The finding of the learned District Judge that
the petitioner had consented for the proceedings by
the sole/nominee Arbitrator was incorrect and
contrary to the records;
(v) The learned District Judge ought not to have
relied on the report of the KLS-GIT, as the said
report was prepared behind the back of the petitioner
and was conducted without notice;
(vi) The Award of interest and compensation was in
excess of jurisdiction conferred by virtue of the Joint
Venture Agreement;
(vii) That the finding regarding waiver in terms of
Section 4 of the Arbitration Act was incorrect;
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11. The respondents on the other hand had
contended as follows:-
(i) That the limited scope under Section 34 and
Section 37 would not permit an inquiry into the
merits nor it would permit re-appraisal of evidence;
(ii) That the scope of Section 37 would restrict the
power of the Court and unless the Award would
“shock the conscience of the court.” This Court
cannot substitute its own view to that of the
Arbitrator.
(iii) That the petitioner by participating in the
proceedings and furnishing documents had explicitly
consented to the appointment of the nominee
Arbitrator, and by such conduct in not objecting to
the constitution of the Tribunal was deemed to have
waived the right to object.
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(iv) That the inaction of the petitioner in exercising
his right of appointing his nominee Arbitrator would
result in pre-empting the necessity of approaching
the Court under Section 11(6) of the Arbitration Act;
(v) That the petitioner themselves have given up
the contention of disqualification as contemplated
under Section 12(5) of the Arbitration Act;
12. Though, the Court under Section 34 of the
Arbitration Act has dealt with various aspects including
regarding reference to arbitration by competent party,
constitution of the tribunal, alleged incapacity of the
Petitioner to appear before the arbitrator, illegality in the
procedure adopted by the arbitrator, alleged ground of
patent illegality raised by the petitioner, however this
court confines its finding on aspect of an invalidly
constituted Tribunal in light of the law that proceedings by
an arbitral Tribunal not constituted as per the Joint
Venture Agreement would invalidate the proceedings.
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Accordingly, the analysis and finding is restricted to such
aspect.
13. Heard Sri S.S.Naganand, learned Senior
Counsel appearing on behalf of Sri S.B.Hebballi for the
petitioner and Sri Anant Mandagi, learned Senior Counsel
appearing on behalf of Sri Mrutyunjaya Tata Bangi for
caveat-respondent Nos.1 to 7.
14. The point for consideration in this appeal is:-
“Whether the Arbitral proceedings by the
sole Arbitrator despite procedure prescribed in
Clause-25 of the Joint Venture Agreement
regarding constitution stood vitiated, giving rise to
a ground for interference in the proceedings under
Section 34, which having been rejected has made
out grounds for interference in the present
proceedings under Section 37 of the Arbitration
Act?”
15. Clause-25 of the Joint Venture Agreement
entered into by the parties provides for arbitration as a
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procedure of resolution of disputes whereby, the party
raising the dispute was required to serve a notice on the
other party detailing the dispute and nominating in that
notice its own nominee Arbitrator. The party receiving
the notice was then required to nominate its Arbitrator.
It is thereafter that the Arbitrators so appointed would
appoint an Umpire.
16. Clause 25 of the Joint Venture Agreement reads
as hereunder:-
“ 25. DISPUTE AND ARBITRATION
That in case of any dispute between the FIRST
PARTY and the SECOND PARTY regarding this
agreement, it is agreed that the dispute will be
resolved amicably between the two parties and
supplementary agreements may be subsequently
made to mitigate the matter.
And that if the two parties cannot resolve the
dispute, the same shall be referred to arbitrators
appointed in a manner hereinafter provided;
The party raising the dispute shall serve a notice
upon the other party advising that a dispute or
difference has arisen and nominate in that notice its
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own arbitrator. The party receiving the notice shall,
within 30 days (Thirty days) after receiving such
notice, nominate its arbitrator by advising the party
raising the dispute and name of the arbitrator
appointed by the other party, the arbitrators so
appointed shall appoint an umpire if necessary, in
terms of rules and meaning of The Arbitration and
Conciliation Act, 1996-(hereinafter referred to as
the Act). The award of the arbitrators or umpire as
the case may be, shall be final, conclusive and
binding upon the parties thereto, Arbitration
proceeding shall be conducted in accordance with
the rules and meaning of the Act and its statutory
modification shall or re-enactment thereof in force
from time to time. The venue of arbitration shall be
decided by the arbitrators having regard to costs
and convenience of the parties.”
17. Once the dispute arose, the respondent took
recourse to Clause-25 of the Joint Venture Agreement. It
issued notice to the petitioner on 09.01.2018 and
appointed its nominee arbitrator on 10.01.2018. When the
petitioner did not respond to the notice within the
stipulated period of time, the respondent instructed its
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nominee to take up arbitral proceedings. Admittedly, the
petitioner did not appoint its nominee in terms of the
agreed procedure under Clause-25 of the Joint Venture
agreement. It is further made out that the respondent’s
nominee took on the role of Sole Arbitrator, conducted
proceedings and passed an Award in light of the petitioner
not having exercised its option to nominate the Arbitrator.
U NILATERAL A PPOINTMENT -
18. The question that then remains is as to whether
the proceedings by the sole nominee Arbitrator amounts to
a violation of the principle of party autonomy and is in
violation of the principle embodied under Section 18 of the
Arbitration Act consequently vitiating the entirety of the
arbitration proceedings.
19. Though the respondents have contended that
the petitioner has forfeited his right by not exercising the
option available under Clause-25 to appoint his nominee,
and in the alternative, has failed to reveal the name of his
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nominee, nevertheless, the procedure prescribed under
Section 11(6) of the Arbitration Act, has not been
followed.
20. Where an Arbitration Clause provides for
nomination of an Arbitrator by each of the parties, the
exercise of such option by one of the parties and non-
exercise of such option by the other party does not ipso
facto lead to abandonment of procedure prescribed under
Section 11(6) of the Arbitration Act and resort to
proceedings by a nominee of one of the parties is
impermissible.
21. Under the dispute resolution clause both parties
are entitled to nominate their nominees, inaction by one of
the parties to nominate an Arbitrator would not permit the
other party’s nominee to proceed as sole Arbitrator. In
such circumstance, the party having exercised his power
to nominate was required to approach the Court under
Section 11(6) for appointment of his nominee Arbitrator.
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22. The Apex Court in Datar Switchgears Ltd., v.
1
Tata Finance Ltd. and Another has expressed such
view, which position of law has been reiterated in Deep
Trading Company v. Indian Oil Corporation and
2
Others . Para 19 of the decision in Datar Switchgeards
Ltd., (supra) reads as follows:-
“19. So far as cases falling under Section 11(6)
are concerned — such as the one before us — no
time limit has been prescribed under the Act,
whereas a period of 30 days has been prescribed
under Section 11(4) and Section 11(5) of the Act.
In our view, therefore, so far as Section 11(6) is
concerned, if one party demands the opposite
party to appoint an arbitrator and the opposite
party does not make an appointment within 30
days of the demand, the right to appointment
does not get automatically forfeited after expiry
of 30 days. If the opposite party makes an
appointment even after 30 days of the demand,
but before the first party has moved the court
under Section 11, that would be sufficient. In
other words, in cases arising under Section
1
(2000) 8 SCC 151
2
(2013) 4 SCC 35
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11(6), if the opposite party has not made an
appointment within 30 days of demand, the right
to make appointment is not forfeited but
continues, but an appointment has to be made
before the former files application under Section
11 seeking appointment of an arbitrator. Only
then the right of the opposite party ceases. We
do not, therefore, agree with the observation in
the above judgments that if the appointment is
not made within 30 days of demand, the right to
appoint an arbitrator under Section 11(6) is
forfeited.”
23. The procedure for appointment of an Arbitrator
is a right conferred in furtherance of party autonomy. The
recognition of the principle of party autonomy is further
reflected in the treatment of parties by the Arbitrator as
enshrined under Section 18 of the Arbitration Act. Section
18 provides for parties to be treated with equality and be
afforded full opportunity.
24. The Apex Court in Bhadra International
(India) Pvt. Ltd., and Others v. Airports Authority of
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3
India [ Bhadra ] has observed at paras-33 and 34 as
follows:-
33. Section 18 outlines two principles : first, equal
treatment of parties; and secondly, right to a fair
hearing. The principle of equal treatment of parties
applies not only to the arbitral proceedings, but also to
the procedure for appointment of arbitrators. The section
casts a responsibility on the arbitrator to act impartially,
objectively, and without bias, and also on the parties to
adhere to standards of fairness. The principle of ‘equal
treatment of the parties' means that the parties must
have the possibility of participating in the constitution of
the arbitral tribunal on equal terms.
34. Equal participation of the parties in the process of
appointment of arbitrators entails that the contracting
parties have an equal say in the constitution of the
arbitral tribunal. Such participation eliminates the
likelihood of challenges to the arbitrator at a later stage.
It is needless to say that independence and impartiality
in arbitral proceedings would be served only when the
parties participate equally at all stages.
25. Para-34 reflects party autonomy insofar as
contracting parties have an equal say in the constitution of
3
(2026) SCC OnLine SC 7
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the Arbitral Tribunal. In the present case, party autonomy
and the principle of fairness is sought to be ensured in the
process of the constitution of the Arbitral Tribunal by
providing for both parties to be vested with the right to
make a nomination and the nominees in turn could
appoint an umpire.
26. When such procedure of constituting the
Arbitral Tribunal is provided, the action of one of the
parties in making his nominee as the Sole Arbitrator
without invoking the procedure under Section 11(6) of the
Arbitration Act on the failure of the other side to exercise
option of making its nomination results in constituting a
Arbitral Tribunal based on an unilateral appointment.
27. In the present case before us, the petitioner
after the proceedings of 05.03.2018 had addressed a
letter on 08.03.2018 stating that though proceeding was
fixed on 09.03.2018, he had requested for an adjournment
to enable appointing of an Arbitrator as his nominee and
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also stating that he would not be able to attend due to his
illness.
28. The arbitral proceedings on 09.03.2018 though
records petitioner’s request for adjournment, there is no
reference to request made by him for appointment of an
Arbitrator.
29. When the petitioner by his letters dated
26.03.2018 and 12.04.2018 has asserted his intention to
make his nomination, the overlooking of such stand by the
nominee of the respondent and continuation of
proceedings amounts to violation of the principle of parties
being treated with equality as contemplated under Section
18 of the Arbitration Act.
30. Where the respondent alone had exercised right
to appoint the nominee Arbitrator and petitioner had
specifically sought time to appoint his Arbitrator and had
communicated such opinion to the respondent’s nominee
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Arbitrator, the nominee Arbitrator himself ought to have
deferred the proceedings calling upon the parties to follow
the procedure prescribed for appointment of an Arbitrator
under Clause-25 of the Joint Venture Agreement. Further,
where there was inaction by one of the parties to exercise
power to nominate, the respondents’ nominee Arbitrator
ought to have directed the parties to approach the Court
under Section 11(6) of the Arbitration Act for appointment
of an Arbitrator.
31. Section 11(6) of the Arbitration Act provides for
approach to the Court under the following circumstances:-
“11. Appointment of arbitrators.—
(6) Where, under an appointment procedure agreed
upon by the parties,—
(a) a party fails to act as required under that
procedure; or
(b) the parties, or the two appointed arbitrators, fail
to reach an agreement expected of them under that
procedure; or
(c) a person, including an institution, fails to perform
any function entrusted to him or it under that procedure,
a party may request …
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3
a [the appointment shall be made, on an application
of the party, by the arbitral institution designated by the
Supreme Court, in case of international commercial
arbitration, or by the High Court, in case of arbitrations
other than international commercial arbitration, as the
case may be] to take necessary measure, unless the
agreement on the appointment procedure provides other
means for securing the appointment.
32. Section 11(6) of the Arbitration Act ensures the
principle of equal treatment of parties by placing the Court
incharge of the procedure of appointment of Arbitrators
where the party fails to act as required under the
procedure as envisaged under Section 11(6)(a) or where
the person fails to perform any function entrusted to him
under that procedure as per Section 11(6)(c) of the
Arbitration Act.
33. Section 11(6) of the Arbitration Act by its
procedure preempts unilateral appointments which would
have the tendency to violate principles of fairness and
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would render the Awards passed open to be assailed on
the principles of “Public Policy of India” and “Fundamental
Policy of Indian Law”.
34. The observations of the Apex Court in Dharma
4
Prathishthanam v. Madhok Construction (P) Ltd.,
would support the view discussed above. Para-12 of the
decision is extracted hereinbelow:-
12. On a plain reading of the several
provisions referred to hereinabove, we are clearly of
the opinion that the procedure followed and the
methodology adopted by the respondent is wholly
unknown to law and the appointment of the sole
arbitrator Shri Swami Dayal, the reference of
disputes to such arbitrator and the ex parte
proceedings and award given by the arbitrator are
all void ab initio and hence nullity, liable to be
ignored. In case of arbitration without the
intervention of the court, the parties must
rigorously stick to the agreement entered into
between the two. If the arbitration clause names an
arbitrator as the one already agreed upon, the
appointment of an arbitrator poses no difficulty. If
4
(2005) 9 SCC 686
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the arbitration clause does not name an arbitrator
but provides for the manner in which the arbitrator
is to be chosen and appointed, then the parties are
bound to act accordingly. If the parties do not agree
then arises the complication which has to be
resolved by reference to the provisions of the Act.
One party cannot usurp the jurisdiction of the court
and proceed to act unilaterally. A unilateral
appointment and a unilateral reference — both will
be illegal. It may make a difference if in respect of a
unilateral appointment and reference the other
party submits to the jurisdiction of the arbitrator
and waives its rights which it has under the
agreement, then the arbitrator may proceed with
the reference and the party submitting to his
jurisdiction and participating in the proceedings
before him may later on be precluded and estopped
from raising any objection in that regard. According
to Russell (Arbitration, 20th Edn., p. 104)—
“An arbitrator is neither more nor less than a
private judge of a private court (called an Arbitral
Tribunal) who gives a private judgment (called an
award). He is a judge in that a dispute is submitted
to him; … He is private insofar as (1) he is chosen
and paid by the disputants, (2) he does not sit in
public, (3) he acts in accordance with privately
chosen procedure so far as that is not repugnant to
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public policy, (4) so far as the law allows he is set
up to the exclusion of the State courts, (5) his
authority and powers are only whatsoever he is
given by the disputants' agreement, (6) the
effectiveness of his powers derives wholly from the
private law of contract and accordingly the nature
and exercise of these powers must not be contrary
to the proper law of the contract or the public policy
of England, bearing in mind that the paramount
public policy is that freedom of contract is not lightly
to be interfered with.”
35. The non-adherence to procedure prescribed for
appointment of an Arbitrator and the nominee of one of
the parties proceeding further in the arbitration
proceedings would have the effect of vitiating the
arbitration proceedings.
36. While such action by the Arbitrator is in
violation of principle of equal treatment, the jurisdictional
flaw is usurpation of the power of the Arbitrator at the
instance of only one party without recourse to procedure
under Section 11(6) of the Arbitration Act which provides
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for the procedure under the clause for appointment of an
Arbitrator cannot be followed. Such procedure, whereby,
the nominee of one party conducts proceedings
overlooking the right of the other party to appoint his
nominee provided for under the procedure for constitution
of the Arbitral Tribunal would negate the principle of
fairness and party autonomy and thus, the constitution of
a Arbitral Tribunal by the nominee of only one of the
parties would be in violation of the principle of equal
treatment and party autonomy which is one part of
Section 18 of the Arbitration Act.
37. The Apex Court in Bhadra (supra) has also
sought to balance the principle of party autonomy and
equal treatment of parties by observing that the principle
of equal treatment of parties extends not only as regards
procedure for appointment of Arbitrators, but also in the
conduct of arbitral proceedings.
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38. While the latter aspect of extending the
principle of equal treatment of parties to the process of
conduct of arbitral proceedings would constitute a legal
ground for challenge in the proceedings under Section 34
of the Arbitration Act, however, where the principle of
equal treatment of parties which also embodies principle of
party autonomy stands violated by procedure for
constitution of Arbitral Tribunal, which contemplates role
to both the parties, such violation would render the
foundation of the arbitral proceedings flawed and
constitute a jurisdictional lapse vitiating the entirety of the
proceedings.
39. Where it is found that in the constitution of the
Arbitral Tribunal, there is a violation of the procedure
which otherwise guaranteed equal treatment of parties,
the proceedings conducted by such Arbitral Tribunal, which
is improperly constituted would fail as being proceedings
by an incompetent Arbitral Tribunal.
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40. Such violation of procedure would render the
Arbitrator legally incapable of performing his function
based on the principle ‘ de jure’ inability. The subsequent
proceedings of the Arbitrator cannot stand on an edifice of
invalidly constituted Arbitral Tribunal. Such proceedings
would amount to a nullity. The observations of Apex Court
in Bhadra (supra) at paras-113 to 116 reflect the
position in law and read as follows:-
“c. Challenge to the ineligibility of the
arbitrator at any stage of the proceedings
113. A challenge to an arbitrator's ineligibility could be
raised at any stage because an award passed in such
circumstance is non-est, i.e., it carries no
enforceability or recognition in law. We say so
because an arbitrator does not possess the jurisdiction
to pass an award. In arbitration, the parties vest the
jurisdiction in the tribunal by virtue of a valid
arbitration agreement and an appointment made in
accordance with the provisions of the Act, 1996. This
jurisdiction is grounded in the consent of the parties
as explained in the foregoing paragraphs of this
judgment.
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114. In this context, jurisdiction means the authority
of an arbitral tribunal to render a decision affecting
the merits of the case. An arbitrator who lacks
jurisdiction cannot make an award on the merits. With
a view to dispel any doubt and lend clarity, we deem
it appropriate to observe that the jurisdiction of the
arbitral tribunal is distinct from the admissibility of the
dispute, i.e., the arbitrability of the claims.
115. A question pertaining to the jurisdiction of the
arbitral tribunal arises when the tribunal is
fundamentally incompetent to render any decision at
all. In other words, a question of jurisdiction pertains
to the ability of the tribunal to hear a case, whereas
questions of admissibility presuppose that the tribunal
has jurisdiction. An award passed by an arbitrator
who does not have jurisdiction strikes at the very
authority of the arbitrator.
116. This Court, in catena of decisions, has held that
the validity of a decree can be challenged even in
execution proceedings if the court passing such
decree lacked subject-matter jurisdiction over the
dispute. As a decree passed by a court without
jurisdiction goes to the root of the matter. Any
decision passed by a court lacking jurisdiction would
be coram non judice, since a court cannot give itself
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jurisdiction. No act of the parties can cure an inherent
lack of jurisdiction.
(emphasis in original)
41. In terms of the communication at Annexure-‘F4’
dated 12.04.2018 which is the letter addressed to the
Arbitrator, it is reiterated that the petitioner had sought
deferment of proceedings due to his ill health and had
averred in the communication that his Arbitrator would be
in contact.
42. The petitioner further has addressed another
communication to the Arbitrator at Annexure-‘F5’ dated
03.05.2018 again making his stand clear that he did not
accept the Arbitrator as “Sole Arbitrator” and asserts that
he would wish to appoint his Arbitrator through Court of
law, while reiterating his previous letters containing his
request to appoint an Arbitrator.
43. The petitioner in his letter addressed to the
Arbitrator on 08.05.2018 had registered opposition to the
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continuance of the arbitration proceedings. Such objection
was reiterated at a subsequent stage of the same
proceedings when the petitioner has expressed opinion by
letter dated 04.01.2019, copy of which is produced at
Annexure-‘G2’, registering opposition to continuance of the
arbitration proceedings by the Sole Arbitrator. Despite
such objections, the continuance of the proceedings by the
Sole Arbitrator renders the proceedings legally flawed.
44. The challenge to the Arbitral Award could be
raised in terms of Section 34(2)(a)(v) of the Arbitration
Act where the composition of the Arbitral Tribunal or the
arbitral procedure was not in accordance with the
agreement of the parties. In the present case, as the Sole
Arbitrator was a nominee of the respondent and such
constitution was in violation of the procedure prescribed, it
could be stated that such ground was available and was
made out.
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UBLIC OLICY OF NDIA
P P I .-
45. Further, under the principle that the Award
violates ‘Public Policy of India’ or on the ground that it
violates ‘Fundamental Policy of Indian law’, the Award
could also be assailed.
46. The interpretation to the above concepts is
found in the decision of Bhadra (supra) at para-111,
which reads as follows:-
“111. An award passed by an arbitrator who is found
to be ineligible cannot be enforced. In CORE II (supra),
a Constitution Bench of this Court held that the concept
of “public policy of India” and “fundamental policy of
Indian law” means complying with statues and judicial
precedents, and principles of natural justice. It was
categorically held that “the most basic notions of
morality and justice” mentioned in the Explanation 1 to
Section 34(b) includes bias. The observations of this
Court in paragraphs 163 and 164 respectively
reproduced hereinbelow squarely apply to the facts of
the present case. The relevant extract has been
reproduced thus:—
“158. Section 34(2)(b) specifically provides that
an arbitral award may be set aside if the court
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finds that the arbitral award conflicts with the
public policy of India. The provision further clarifies
“public policy of India” to only mean that : (i) the
making of the award was induced or affected by
fraud or corruption or was in violation of Section
75 or Section 81; (ii) it is in contravention with the
fundamental policy of Indian law; or (iii) it is in
conflict with the most basic notions of morality or
justice.
159. This Court has construed the expression
“public policy of India” appearing under Section 34
to mean the “fundamental policy of Indian
law”. [Ssangyong Engg. & Construction Co.
Ltd. v. NHAI, (2019) 15 SCC 131, para 34 : (2020)
2 SCC (Civ) 213; NHAI v. P. Nagaraju, (2022) 15
SCC 1 : (2024) 2 SCC (Civ) 414, para 39] The
concept of “fundamental policy of Indian law” has
been held to cover compliance with statutes and
judicial precedents, adopting a judicial approach,
and compliance with the principles of natural
justice. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC
163, para 11 : (2019) 2 SCC (Civ) 293] In OPG
Power Generation (India) (P) Ltd. v. Enexio Power
Cooling Solutions (India) (P) Ltd. [OPG Power
Generation (India) (P) Ltd. v. Enexio Power Cooling
Solutions (India) (P) Ltd., (2025) 2 SCC 417 :
(2025) 1 SCC (Civ) 54], this Court explained the
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concept of “fundamental policy of Indian law” thus
: (SCC pp. 467-68, paras 55-56)
“55. … The expression “in contravention with
the fundamental policy of Indian law” by use
of the word “fundamental” before the phrase
“policy of Indian law” makes the expression
narrower in its application than the phrase “in
contravention with the policy of Indian law”,
which means mere contravention of law is not
enough to make an award vulnerable. To
bring the contravention within the fold of
fundamental policy of Indian law, the award
must contravene all or any of such
fundamental principles that provide a basis for
administration of justice and enforcement of
law in this country.
56. Without intending to exhaustively
enumerate instances of such contravention,
by way of illustration, it could be said that
(a) violation of the principles of natural
justice;
(b) disregarding orders of superior courts in
India or the binding effect of the judgment of
a superior court; and
(c) violating law of India linked to public good
or public interest, are considered
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contravention of the fundamental policy of
Indian law.”
160. In Avitel Post Studioz Ltd. v. HSBC PI Holdings
(Mauritius) Ltd. [Avitel Post Studioz Ltd. v. HSBC PI
Holdings (Mauritius) Ltd., (2024) 7 SCC 197, para 34
: (2024) 3 SCC (Civ) 780] , this Court held that the
most basic notions of morality and justice under the
concept of “public policy” will include bias.
161. […] As a corollary, Section 34 places a
responsibility on the Arbitral Tribunals to ensure that the
arbitral proceedings are consistent with the fundamental
policy of Indian law. [Vidya Drolia v. Durga Trading
Corpn., (2021) 2 SCC 1, pp. 69-70, para 70:“70.
Arbitrators, like the courts, are equally bound to resolve
and decide disputes in accordance with the public policy
of the law. Possibility of failure to abide by public policy
consideration in a legislation, which otherwise does not
expressly or by necessary implication exclude arbitration,
cannot form the basis to overwrite and nullify the
arbitration agreement. This would be contrary to and
defeat the legislative intent reflected in the public policy
objective behind the Arbitration Act. Arbitration has
considerable advantages as it gives freedom to the parties
to choose an arbitrator of their choice, and it is informal,
flexible and quick. Simplicity, informality and expedition
are hallmarks of arbitration. Arbitrators are required to be
impartial and independent, adhere to natural justice, and
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follow a fair and just procedure. Arbitrators are normally
experts in the subject and perform their tasks by referring
to facts, evidence, and relevant case law.”]
(emphasis in original)
Thus it becomes clear that the expression ‘Fundamental
Policy of Indian Law’ is extended to compliance with
statues or ‘Judicial Precedents’.
47. This Court is conscious that the observations
made in Bhadra (supra) is in reference to Section 12(5),
but however, the observations made and relied upon are
as regards concepts that are not limited to Section 12(5)
of the Arbitration Act.
48. The failure to follow procedure contemplated
under Section 11(6)(a) and Section 11(6)(c) of the
Arbitration Act which is mandated in certain case of
defaults and permitting a nominee of one of the parties to
conduct proceedings as a Sole Arbitrator would constitute
a ground of violation of ‘Fundamental Policy of Indian
Law’.
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49. The respondent has contended that the
petitioner has not pressed the ground as regards the
disqualification under Section 12(5) and if that were to be
so, the Award passed with participation of the petitioner
cannot be interfered with, de hors Section 12(5).
Wherever there is violation of the procedure prescribed for
appointment of an Arbitrator, the parties are required to
approach the Court under Section 11(6)(a) and 11(6)(c)
and without following such invocation, there is no
provision in law that would permit nominee of one party to
assume power to arbitrate. Such usurpation would
amount to a unilateral appointment not contemplated in
law.
W AIVER UNDER S ECTION 4 OF THE A RBITRATION A CT
50. In terms of the contention of waiver under
Section 4 of the Arbitration Act, there could be a waiver of
the right to object where the party proceeds with the
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arbitration without stating his objection to such non-
compliance or non-adhering to the requirement under the
Arbitration Clause in the Joint Venture Agreement “without
undue delay” or stating his objection within the time-limit
provided.
51. Though Section 4 itself refers only to certain
procedural requirements which are derogable procedures,
as regards such procedure, there could be no waiver if
objection is raised at the earliest point of time.
Admittedly, the first date of arbitration proceedings itself
was on 05.03.2018 and the letter indicating intention to
appoint an Arbitrator by the petitioner was expressed on
08.03.2018 itself.
52. The admitted facts would reveal that the
petitioner did appear before the Arbitrator on 05.03.2018,
but that however was the first date of the proceedings.
The practice of settling the procedure is normally on the
first date which would include the procedure to be followed
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by the Arbitral Tribunal in conducting proceedings [Section
19(2)], determining period of time agreed upon by the
parties for making their claim and putting forth defence
[Section 23(1)].
53. It would be relevant to take note of the letter
addressed on behalf of the petitioner to the Arbitrator
dated 08.05.2018, copy of which is enclosed at
Annexure-‘G1’ in the compilation filed before this Court
and is stated to constitute the records of the proceedings
under Section 34 of the Arbitration Act. It is specifically
stated that the representative of the petitioner Sri Satish
Giri, as he was known to the Arbitrator was assured that
the meeting fixed on 05.03.2018 would be an “informal
mediation”, as the Arbitrator was known to both the
parties. It is further submitted that, in light of this
familiarity with the Arbitrator, the petitioner attended the
proceedings without help or support of the legal
practitioner. It is also made out that the petitioner was
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not aware as to the formal nature of proceedings on such
date.
54. While learned counsel for the respondent has
contended that the action of the petitioner in attending the
arbitration proceedings would also amount to a deemed
waiver under Section 4 of the Arbitration Act which would
be an alternative argument, as regards such contention as
well, the discussion made supra at paras – 41, 42 and 43
would clearly make out that there is no such waiver
factually.
55. The reliance by the respondent on Apex Court’s
decision in Vidyawati Construction Company v. Union
5
of India , in specific, to the observations made in paras-
4, 15 and 17, is misplaced. The observations are extracted
as follows:
“4. The proceedings commenced before the sole
arbitrator. After filing the statement of defence, an
objection to the jurisdiction of the sole arbitrator was
5
(2025) 5 SCC 347
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raised on the ground that the arbitration clause in
the contract provided for the appointment of three
arbitrators. The learned sole arbitrator rejected the
said objection.
[…]
15. Hence, there is a clear bar on raising a plea of
the lack of jurisdiction of the Arbitral Tribunal after
submission of the statement of defence. Therefore,
after 14-2-2004, the respondent could not have
objected to the jurisdiction of the sole arbitrator.
Hence, the objection raised by way of an application
dated 24-4-2004 was rightly rejected by the learned
arbitrator by the order dated 20-10-2004.
[…]
17. In view of the respondent's conduct and sub-
section (2) of Section 16 of the Arbitration Act,
Sections 34 and 37 Courts were not right in
upholding the respondent's objection to the
jurisdiction of the Arbitral Tribunal. Therefore, the
impugned judgments [Vidyawati Construction
Co. v. Union of India, 2020 SCC OnLine All 1371]
cannot be sustained.
56. The above observations were made in the
context of an Arbitrator appointed by the Court and in the
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context of an objection raised after filing the statement of
defence. In the present case, the Arbitrator has assumed
power unilaterally contrary to the procedure and in light
of discussion made above at paras - 41, 42 and 43
objections were raised at the early point of time. Further,
the participation in the proceedings on one occasion apart
from furnishing the documents on two occasions is with
the simultaneous objection regarding non-consideration
of his request for adjournment till he appoints an
Arbitrator. Such objection raised would not entitle the
Arbitrator to construe action of the petitioner as
amounting to acquiescence.
57. Accordingly, we hold that the learned District
Judge while dealing with Section 34 of the Arbitration Act
has grossly erred in not recording an appropriate finding
regarding objections of the petitioner. The finding at
paras-16 and 18 of the order dated 22.04.2022 by the
learned Prl. District Judge regarding waiver of right to
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object in terms of Section 4 is erroneous in terms of the
discussion at paras-41, 42 and 43.
LLEGALITY OF THE RDER UNDER ECTION OF THE
I O S 34
A RBITRATION A CT
58. The recourse to Section 10 of the Arbitration
Act by the learned Prl. District Judge in the proceedings
under Section 34 is erroneous, as Section 10 comes into
play where the procedure for appointment results in a
even number of Arbitrators. It cannot be extended to the
present case where the Arbitration Clause does provide for
a valid procedure of both parties appointing a nominee
each who would then appoint an umpire. Without
resorting to Section 11(6), the respondent could not have
called upon his nominee to be the Sole Arbitrator.
59. The finding by the District Court in the
proceedings under Section 34 that the petitioner had
consented for taking up proceedings by the Sole Arbitrator
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is contrary to the material on record consisting of letters
dated 24.03.2018 , 12.04.2018, 03.05.2018, 08.05.2018.
60. What flows from the above discussion is that
the Arbitral Tribunal which has conducted the proceedings
suffered from de jure invalidity in so far as procedure
under Clause-25 of the Joint Venture Agreement was not
followed. Once finding is returned as regards to invalidity
of constitution of tribunal, the proceedings would amount
to a nullity. An objection regarding such aspect raised at
any stage goes to the root of jurisdiction and having being
dealt with and held in favour of the Petitioner, the other
findings raised in Section 34 proceedings need not be dealt
with. Such approach maybe necessary as the power of the
Court under Section 37 for interference is narrowly
circumscribed. If the interference is to stand on the
jurisdictional aspect the very scope of proceedings under
Section 34 and Section 37 may not require finding on
other aspects.
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61. In light of the above discussion, the question
for consideration raised is answered in the affirmative.
62. Accordingly, the order dated 22.04.2022 passed
in A.P.No.2/2021 by the Prl. District Judge, Belagavi under
Section 34 of the Arbitration Act as well as the “Final
Arbitration Award” passed on 28.01.2019 by the Sole
Arbitrator Sri Mallikarjun S. Mudnur, are set aside. Liberty
is reserved to the respondents take out appropriate
proceedings under the Joint Venture Agreement dated
17.04.2016 afresh for redressal of their grievance as is
permissible in law.
Accordingly, the appeal is disposed of.
Sd/-
(S.SUNIL DUTT YADAV)
JUDGE
Sd/-
(K.G.SHANTHI)
JUDGE
VGR